Lyft goes public: Stock rises almost 9% in its Nasdaq debut

Shares of ride-hailing service Lyft rose almost 9 percent in the company's Nasdaq debut Friday, as investors shrugged off any concerns about future profitability.

The stock trading under the ticker “LYFT” closed at $78.29, up 8.7 percent from its offering price of $72. Shares jumped at the open, surging as high as $88.60 per share during trading.

The company's initial public offering, or IPO, was highly anticipated as a potential bellwether for other major tech companies that are lining up to go public sometime this year, including Lyft's major rival Uber.

"This is a lightning start for Lyft’s stock," said Daniel Ives, managing director of equity research at Wedbush Securities, in an email. "The robust start to trading is also a clear positive for other tech names that are watching Lyft to gauge investor demand."

Lyft co-founders John Zimmer and Logan Green cheer as they as they ring a ceremonial opening bell in Los Angeles. On Friday the San Francisco company's stock will begin trading on the Nasdaq exchange under the ticker symbol "LYFT."(Photo: Ringo H.W. Chiu, AP)

The IPO attracted quite a bit of investor interest, and one of its biggest investors General Motors is expected to have won big. The automaker invested $500 million in Lyft in January 2016 and holds 18.6 million Class A shares of the company.

What else should you know? Here are the ins and outs of Lyft’s IPO:

Stock details

The offering included 32.5 million shares of Class A common stock priced at $72 per share. Lyft's original price range estimate was $62 to $68 per share. It increased that estimate to a range of $70 to $72 apiece on Wednesday, an indication of strong investor demand, said Ygal Arounian, a senior research analyst at Wedbush.

“That’s typically a good sign to see a pop on the first day,” he said Thursday before the IPO. Arounian this week rated the company’s shares “Neutral” with a $80 price target.

How big is that? Lyft is the year’s largest IPO so far. Its valuation at $24.3 billion is more than the first quarter’s other 17 IPOs combined, said Matthew Kennedy, senior IPO market strategist at Renaissance Capital, a provider of institutional IPO research.

Is Lyft profitable?

While the company has materially grown its active ridership, number of trips per rider, number of drivers and the average revenue per ride, it still hasn’t turned a profit, according to Arounian and Kennedy.

That’s not necessarily unusual for a private company going public, but Lyft has a ways to go, Kennedy said. “It’s not common for a company this large to be coming to market with this big of losses,” he said.

How does Lyft plan to use IPO money?

In a regulatory filing Thursday, Lyft said it would raise $2.3 billion with the offering price at $72 per share. The company plans to use the proceeds for working capital, operating expenses, capital expenditures, future acquisitions and investments in new products, services or technologies.

Arounian expects the company to continue to invest in autonomous driving technology and more bike- and scooter-sharing opportunities. In November, Lyft acquired Motivate, the largest bike-share service in the U.S. It operates New York’s City Bike, San Francisco’s Ford GoBike, Chicago’s Divvy and Washington, D.C.’s Capital Bikeshare, among others.

How can I buy Lyft shares?

Shares are available to purchase now in the open market on the Nasdaq. If you’re interested in the stock, but don’t like owning individual shares, you could consider investing in Renaissance’s IPO exchange-traded fund that will include Lyft in its portfolio.

Potential investors should always do their research before buying a company's stock to understand the potential risks as well as upside. "Don’t just buy based on how much you like the brand, even if you use Lyft everyday," Kennedy said.

What about the Uber stock sale?

Lyft’s IPO represents the first of several highly valued tech companies going public soon, including Slack, Pinterest and Lyft’s main competitor and the No. 1 ride-hailing company, Uber.

Uber is expected to file for an IPO soon, according to analysts. It was last valued at $72 billion, Kennedy said, but the IPO value could climb as high as $100 billion to $110 billion, depending on Lyft's IPO performance.

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Lyft is lifting the target price for its initial public offering as excitement builds surrounding the stock market debut of the ride-hailing service.
AP